Read the summary and the most important questions on Ch 11: Tying + Exclusive Contracting ((Vertical Restraints II)

• 1 Ch 11: Tying + Exclusive Contracting ((Vertical Restraints II)

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• AT gives special treatment to a particular category of non-price vertical restraints:

  Arrangements that cause a buyer to take something form a seller that they otherwise would not.

• How are these arrangements treated differently from other vertical restraints?

  They are treated more harshly in that they are subject to special rules, which generally simplify the plaintiff's evidentiary burden (all other vertical restraints are subject to full RoR)

• When will a tying arrangement be successful?

  Where the buyer desires product X to a sufficient degree that he is willing to buy an additional product, product Y, just so he can get product X.

• Define: Exclusive Dealing Ks

  An agreement that requires some downstream buyer to not purchase a product from other upstream sellers

• Original Justification for treating Ties and Exclusive Ks more harshly

  The original justification (early 20th century) advanced by courts sounded in the unfairness of sellers limiting the commercial freedom of buyers. Not about social efficiency, but ad defense of individual liberty. There is mixed economic evidence on how harmful this variety of vertical restraints actually is.

• Clayton Act 3: General Info

  Prohibits any sort of agreement that causes a buyer to take something form a seller that he otherwise would not (prohibits ties and exclusive contracts)

• CA 3: Physical Jurisdictional Limitation

  Only covers "persons engaged in commerce," meaning that the sale or lease must involve at least 2 states.

• CA 3: Subject Matter Limitation

  Applies only to "goods, wares, merchandise, machinery, or other commodities," meaning that CA 3 does not apply to tying arrangements were the tied product or tying product is a serve or intangible thing (i.e., credit, IP)

• Main Advantage of CA 3 (from plaintiff and AT enforcement perspective)

  CA 3 prohibits arrangements whose effect "may be to substantially lessen competition or tend to create a monopoly in any line of commerce." The courts are split on whether this standard requires a lesser showing that proof of "unreasonableness" under SA 1. Some do hold CA 3 provides an easier showing.

• Tying Claims under SA 2

  The cause of action for challenging ties under SA 2 is distinct form the SA 1 and CA 3 standard. Under SA 2, P must show (a) a very substantial amount of market power (sufficient to constitute "monopoly power") and (b) that the tying arrangement was "exclusionary"